The Product Categories is a simple trick that will make your life easier as your account evolves. You will eventually have many things defined in your account - multiple products, multiple pricing options and checkouts, etc.
The Product Categories give you the possibility to associate your entities with them. In the merchant interface you will be able to filter the products and pricing models by these categories. You might have different groups by market type/country or by product type. It's your choice!
For example, might want to have a group called "Archived" where you can move all the obsolete/unused items.
The Performance Report give you a drill-down option by Product Category, so you can have your own report grouping based on this category type.